Paul Janisch

Draft PPPFA regulation disgust (discussed and cussed)

In his 2015 state of the nation giggle session our very competent, intelligent and decisive president made the following announcement.

Government will set-aside 30% of appropriate categories of State procurement for purchasing from SMMEs, co-operatives as well as township and rural enterprises.

We are quite used to this esteemed personage's platitudes and incredible decisiveness so it might be quite strange to the average person when he does actually deliver on his promises.  He has in fact in the new draft PPPFA regulations.  A Bardot delivery had these same regulations sent to me, it would be wrong not to post them up here for your perusal.

Here are a few of some of the features:

1. 80/20 works for R10m to R50m
2. 90/10 for more than R50m.  If you are seeing new QSE patterns emerging you would be on the money
3. 50/50 points' system for less than R10m

The 80/20 and 90/10 systems work on standard BEE points' allocations.  However the 50/50 system is a lot more interesting. This is what it looks like

Points will be allocated in accordance with the table below

No.	Criteria	Points
1	Price	50
2	Specific Goals:
2.1	Individuals who had no franchise in national elections before the 1983 and 1993 Constitutions	12
2.2	51% or more ownership by females	12
2.3	51% or more ownership by persons with a disability	12
2.4	SMME (Small, Medium and Micro-enterprise)	6
2.5	LED (Local Economic Development)	8

This harks back to the 2001 PPPFA regulations. No franchise before the two constitutions effectively includes all black people as defined. Africans had not vote before '83 and '93. Coloureds and Indians didn't have the vote before 1983. The reference to disabled and women includes ALL women and disabled people.

I do rather like the inclusion of SMME and Local Economic Development because the issue with the current regulations is that it didn't favour regional businesses. What Zille and Kane-Berman missed is this paragraph

(2) (a) For the specific goals under 2.2 to 2.5 in the table above, the Minister of Finance (Minister) may, from time to time, prescribe targets that must be procured from certain categories of person or commodity groups. Therefore, the number of points, as well as the groups referred to in the specific goals in sub-regulation (1)

What this says is that Nene may use set asides. Something that the Constitution would not be happy with (as if that has ever been a problem for our literate and competent legislators), and something that Treasury banned in 2006.

Now onto some of the more interesting features of 2.1 above (you will see on page 8 that this requirement may never be removed from any tender). You'll notice the word "INDIVIDUAL", this is a very specific word, it refers to individuals and not classes of people. As I mentioned African people did not have the vote until 1994. This means that only individuals who are over 21 years old and African can qualify. Indians and Coloureds get a rawer deal. They would need to be 31 years and older (as if they haven't been shafted enough under the revised codes). As this regulation gets on in the years so will the age of the black person increase.

This is pure BBC – a subtle attempt at favouring Africans over other black groups.

Another issue which plagues me is the value of the tender. What the 50/50 system does is give certain types of people up to a 100% price advantage. If they tick all the boxes under 2 above and get 1 more point for price they could 51 points which beats the bidder that only offered the best price (cost effectiveness is a vital ingredient of section 217). The rules are that they should win the bid. But this system is only for bids for less than R10m. If that bidder comes in a R10,000,000.01 then they are no longer part of the R10m scheme. In effect this system will only work for bids less than R5m.

The whole system is completely open for abuse. It is absolutely unconstitutional and unaffordable.   Related articles

Has Treasury been captured by the black business lobby?

Has Treasury been captured by the black business lobby?

Has the Treasury been captured by the black business lobby? Has it bowed before the powerful wind of racial nationalism sweeping through the ruling party and its communist and trade union allies?

If so, will the Reserve Bank be the next domino to fall?

Until now, the Treasury, like the Reserve Bank, has been a bulwark against some of the more reckless tendencies in the government.

But new draft regulations allowing government tenders worth less than R10-million to be evaluated up to 50% on racial and other empowerment criteria and only 50% on price, suggest it is no longer able or willing to resist the racial agenda being pursued by President Jacob Zuma’s allegedly directionless government.

That the Treasury should be willing to incur these higher costs when it is supposed to be keeping government spending under control also suggests the commitment of the ANC to racial ideology is as relentless as that of the National Party (NP).

Tougher black economic empowerment (BEE) requirements were recently put on the statute book, along with tougher employment equity demands.

via www.rdm.co.za

The term I have used in the past is Zungurisation.  The term is possibly unfair but Mr Zungu has been pushing for this.  I haven't seen these proposed changes.  There is little doubt that this proposal will not work constitutionally but this has never stopped those who insist on pushing it through.  Logic would suggest that an almost broke fisc would never go for this.  But they will, they will push it through and then we are in a whole heap of trouble.  Not that they care, and why on earth should we?

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Ownership uber alles - can anyone confirm this?

Management and EE under the revised codes - Udge content with a hint of Jesus

Udge is reputed to be the drafter of the explanation notes that came out in May.  It's a good gig if you can get it because the DTI are never going to publish anything that makes any sense or follows any logic, you'll be drafting explanation notes until Jesus returns.  I haven't read his document but my good friend Chris van Wyk tells me it's clear and the formulas work (now that's a proper endorsement hey Udge).   

The attached spreadsheet is my take on the EE calculations.  It took me an afternoon to figure out this logic, which might not be the Udge-explained logic but it seems to work.  Don't lose sight of the unconstitutionality of these targets and remember that if you have an oversupply of Indians and Coloureds you don't get more points.

Feel free to distribute this spreadsheet with your friends and my enemies.  If there are any serious flaws please let me know and I'll post up your comments and amendments.

On the subject of Jesus returning (if she/he ever came in the first place) can you imagine if he turned out to be white, that would mess with jungle's EAP.

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Ownership uber alles - can anyone confirm this?

Complete large enteprises and QSE scorecard

Vodacom leaps higher on Neotel approval if you are a supplier to them you'd better blacken up quickly

Zuma has vision, but it excludes ordinary people

he understands history as a struggle among giants for honour and for power. His interventions in the economy are a quest to give influence to those he feels are owed it, but have never had enough of it.

He has invested a lot of his time over the past few years giving sway and wealth to traditional leaders — as equity holders in mining operations, as leaders of large land restitution claims and as guardians of customary law. His vision is grand and ambitious. He wants to redistribute a great deal of power to the countryside and have it wielded by a small number of people.

I suspect, too, that his abiding interest in SA’s pending acquisition of nuclear power has similar motives.

He sees himself as righting old wrongs, using a state acquisition process to create considerable wealth for groups of people who received little patronage under former president Thabo Mbeki.

via www.bdlive.co.za

I would argue that this small group of people include a number of black businessmen (as they call themselves) who want to milk the state for all its got. The revised BEE codes smack of this.
How will this idiot's successor plunder to please the next round of entitlements. Will there be anything left? Ask Bob.

Ownership uber alles – can anyone confirm this?

From a DTI presentation on BBBEE, hosted by Black Business Chamber. The presentation and answer session was by Julia Nzimande and Lindiwe Madonzela:

•  If certificate is current we will not be allowed to do a second audit [I surmise here that you can't get a second opinion]
• Management accounts will not be accepted – now have to use audited AFS [Oh well – it will at least cut back on VAT 201 paperwork.  This is going to be a problem and I would imagine difficult to police]
• Drop in sub minimum needs to be reported on the certificate [Oh naughty us, we are named and shamed]
• The 2 points for black junior management will be removed in the next amendments [More's the pity]
• ED and SD – any loans rolled over cannot be counted in the next year [I would imagine that loans will dry up altogether – other ways of generating the points will be discovered that cost less than loans]
• Costs occurred outside RSA as a result of export sales can be excluded from the cost of sales calculation [Wow!!!]
• In the Preferential Procurement calculation imported goods can no longer be excluded if there is a local supplier alternative.  If there is no local supplier then we need to submit a local supplier development plan. [Like that's going to happen]
• Technical Guidelines will only be issued end of Q3 [Udge approved for sure. At least he drafts documents that can actually be read]
• State owned entities will be allowed to set own procurement parameters and it seems likely that they will ask for 51% black ownership in spite of the current codes only requiring 25% [We've seen this already- it will either fail or fronting is going to run rampant. There is so much ineptitude within the public sector, when you throw corruption into the equation things will continue as normal]
• Task team that has been appointed to look into ownership are likely to force some type of narrow scheme in addition to a broad based schemes [Is this a surprise if the Black Business Council is involved. This is where the courts will have to get involved]
• Empowering supplier – additional clause to be added that you need to be a "good citizen" or you will fail the test – example they gave – if you don't pay your toll fees you can be deemed a bad citizen… ..this seems beyond the scope of the law – how can the DTI determine if you are guilty or not – are they going to try and enforce this….[Now hear this. If you make it difficult for companies to comply they won't. If they are not going to be deemed as empowering suppliers then why would they bother with the rest]
• In the new amendments they are talking about an automatic drop to level 8 for failing any sub minimum – the comment was that if you fail one then you are not serious about BBBEE [Does this mean, level 8 automatically. What a great idea. Level 8 becomes the norm]

Nothing really surprises me anymore. The DTI know nothing about running an economy, the BBC knows this and as such can force them into making announcements that define business and general logic.  There is a lot of apartheid style social conditioning in all this.  Nou gaan ons die wit mense lelik opfok!!!

But before we go too deep into this. Can anyone confirm that this was actually discussed?  My source cannot confirm this.

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Vodacom leaps higher on Neotel approval if you are a supplier to them you'd better blacken up quickly

Complete large enteprises and QSE scorecard

Tourism BEE plan will kill jobs, critics say - why Tourism first?

Tourism BEE plan will kill jobs, critics say - why Tourism first?

The (Tourism) draft codes of good practice were published in the government gazette for public comment over the next two months.

"These codes are even more stringent than the already burdensome generic B-BBEE codes, creating additional hurdles which will negatively affect the tourism industry’s ability to create jobs," Mr Hill-Lewis said.

The industry is facing a slump in tourism, ostensibly brought about by the change in visa regulations that requires prospective visitors to SA to apply in person at the office of an embassy. Also, tourists accompanied by minors must be in possession of an unabridged birth certificate when travelling to SA.

Mr Davies, however, defended the sector-specific thresholds, saying they would "ensure that many enterprises ... contribute towards transformation, which will not be the case if the sector was using the amended generic codes".

In terms of the gazetted proposals, the exempted micro-enterprises must generate a total annual revenue of less than R5m, compared with the R10m threshold in the generic codes; qualifying small enterprises must make a total revenue of between R5m and R45m, lower than the R10m–R50m bracket in the generic codes; and exempt large enterprises must make a total annual revenue of more than R45m, lower than the R50m threshold in the generic codes.

The black ownership requirement is also higher in the tourism code and is set at 30% +1 vote, rather than the 25% +1 vote in the generic codes.

Mr Davies said this target "will ensure an increase in transferring economic assets to and mainstreaming of black people in the sector".

Another measure aimed at creating more opportunities for emerging black-owned enterprises is the target for supplier development, which is set at 3% of net profit after tax (npat) compared with the 2% of npat in the generic codes.

Mr Davies said the implementation of supplier development by established businesses in the sector "will lead to job creation and overall growth in the sector".

The amended tourism sector code also allocates more points for the procurement from suppliers that are at least 51% black owned. The weighting points allocated to this, are 12 in order to incentivise support for black-owned enterprises.

Mr Hill-Lewis rejected Mr Davies’s arguments in favour of the proposed codes for the tourism sector. "The DA firmly believes government’s focus must be on empowering and advancing those who are left out of the economy and trapped in unemployment. These codes, however, do the opposite and further benefit the enriched by stifling growth and entry into the industry," he said.

"The tourism industry constitutes 9% of our gross domestic product and employs 1.5-million South Africans. Its growth and success is vital to growing our economy and creating jobs for the 36% of South Africans who cannot find work."

via www.bdlive.co.za

Why is the tourism industry the first to publish their code.  I think it's because tourism includes gambling.  Gambling is big bucks and you need licences to operate casinos.  And you need a level 2 to retain that licence.  Zungurisation.  

There are a number of significant issues that this article covers.  Things like Malusi's tourism stifling immigration policy, increased thresholds (ownership 30.1%, ED and SD now 3.5% of NPAT) et al.  The big issue here is that we can submit comments to until our PCs plutz but they are going to be ignored.  I know that the DTI wants all sectors to mimic their racially skewed policies and that is not to be negotiated.  

I agree with the DA here, these codes will stifle job opportunities and growth.  But what we need to do now is allow market forces to dictate what policies are reasonable and implementable.  You do have to feel for the gambling industry - they need a level 2 to retain their gaming licences.  And this government has shown how they will push a very narrow empowerment agenda ahead of the economy's requirements. 

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Section 217 in the spotlight

Rob and African time

The Minister of Trade and Industry Dr Rob Davies said on 8 May this year that the findings of a technical task team set up to “explore the appropriate balance between active (direct) and passive (broad-based schemes) ownership”
would make its recommendations to him within 30 days.

via it-online.co.za

Well, well, well.

It doesn't mean that HE hasn't seen the recommendations (although I doubt he has). What we don't know is when we will see them

Complete large enteprises and QSE scorecard

You know you were looking for this. Here it is (still an abomination and disgusting piece of social engineering)

Adjusted points

The points' allocation has also been adjusted, 40 points is now the minimum requirement for a level eight contributor.

Contribution Level	2007 Codes	2013 Codes	Recognition level
Level One	≥ 100 points	≥ 100 points	135%
Level Two	≥ 85 points but < 100 points	≥ 95 points but < 100 points	125%
Level Three	≥ 75 points but < 85 points	≥ 90 points but < 95 points	110%
Level Four	≥ 65 points but < 75 points	≥ 80 points but < 90 points	100%
Level Five	≥ 55 points but < 65 points	≥ 75 points but < 80 points	80%
Level Six	≥ 45 points but < 55 points	≥ 70 points but < 75 points	60%
Level Seven	≥ 40 points but < 45 points	≥ 55 points but < 70 points	50%
Level Eight	≥ 30 points but < 40 points	≥ 40 points but < 55 points	10%
Non-Compliant Contributor	< 30 points	< 40 points	0%

Priority elements

Statement 000 declares that Ownership, Skills Development and Enterprise and Supplier Development are priority elements. Failure to meet a 40% sub-minimum of the points in each element will result in the entity's score being discounted by a level. If one or all of the priority elements falls below the designated thresholds then only a single level will be dropped.

Large entities must comply with all three priority elements. QSEs only have to comply with ownership and one other priority element.

Large Enterprises

Large Enterprises - Ownership. Total points - 25 (PRIORITY)
Description		Weighting points	Compliance Target
	Voting rights
Exercisable voting rights in the enterprise in the hands of black people.		4	25% + 1 Vote
Exercisable voting rights in the enterprise in the hands of black women.		2	10%
	Economic interest
Economic interest in the enterprise to which black people are entitled		4	25%
Economic interest in the enterprise to which black women are entitled		2	10%
Economic interest of the following black natural people in the enterprise black designated groups black participants in employee ownership schemes black beneficiaries of broad-based ownership schemes; or black participants in co-operatives are entitled		3	3%
Involvement in the ownership of the Enterprise of black new entrants		2	2%
Net value		8	25%

Large Enterprises - Management Control. Total points - 19
Description			Weighting points	Compliance Target
		Board participation
Exercisable voting rights of black board members as percentage of all board members			2	50%
Exercisable voting rights of black female board members as percentage of all board members			1	25%
Black Executive directors as a percentage of all executive directors			2	50%
Black female Executive directors as a percentage of all executive directors			1	25%
		Other Executive Management
Black Executive Management as a percentage of all executive directors			2	60%
Black female Executive Management as a percentage of all executive directors			1	30%
		Senior Management
Black employees in Senior Management as a percentage of all senior management			2	60%
Black female employees in Senior Management as a percentage of all senior management			1	30%
	Middle Management
Black employees in Middle Management as a percentage of all middle management			2	75%
Black female employees in Middle Management as a percentage of all middle management			1	38%
	Junior Management
Black employees in Junior Management as a percentage of all junior management			2	88%
Black female employees in Junior Management as a percentage of all junior management			1	44%
	Employees with disabilities
Black employees with disabilities as a percentage of all employees			2	2%

Large Enterprises - Skills Development. Total points - 25 (including 5 bonus points) - (PRIORITY)
Description		Weighting points	Compliance Target
	Skills development expenditure on any programme specified in the Learning Programme Matrix for black people as a percentage of the leviable amount
Skills development expenditure on learning programmes specified in the Learning Programmes Matrix for black people as a percentage of leviable amount		8	6%
Skills development expenditure on learning programmes specified in the Learning Programmes Matrix for black people with disabilities as a percentage of leviable amount		4	0.3%
	Learnerships, Apprenticeships and Internships
Number of black people participating in Learnerships, Apprenticeships and Internships as a percentage of number of employees		4	2.5%
Number of black unemployed people participating in Learnerships, Apprenticeships and Internships as a percentage of number of employees		4	2.5%
	Bonus points
Number of black people absorbed by the Measured and Industry Entity at the end of the learnership programme		5	100%

Large Enterprises - Enterprise and Supplier Development. Total points - 44 (including 4 bonus points) (PRIORITY)
Description		Weighting points	Compliance Target
	Preferential Procurement
B-BBEE procurement spend from all Empowering Suppliers based on the B-BBEE procurement recognition levels as a percentage of total measured procurement spend		5	80%
B-BBEE procurement spend from all Empowering Suppliers that are QSEs based on the applicable B-BBEE procurement recognition levels as a percentage of total measured procurement spend		3	15%
B-BBEE procurement spend from all Exempted Micro Enterprises based on the applicable B-BBEE procurement recognition levels		4	15%
B-BBEE procurement spend from all Empowering Suppliers that are at least 51% black owned based on the applicable B-BBEE procurement recognition levels as a percentage of total measured procurement spend		9	40%
B-BBEE procurement spend from all Empowering Suppliers that are at least 30% black women owned based on the applicable B-BBEE procurement recognition levels as a percentage of total measured procurement spend		4	12%
	Bonus points
B-BBEE procurement spend from Designated Group Suppliers that are at least 51% black owned		2	2%
	Supplier Development
Annual value of all supplier development contributions made by the measured entity as a percentage of the target		10	2% of NPAT
	Enterprise Development
Annual value of all Enterprise Development and Sector Specific Programmes made by the measured entity as a percentage of the target		5	1% of NPAT
	Bonus points
Bonus points for graduation of one or more Enterprise Development beneficiaries to graduate to the Supplier Development level		1
Bonus points for creating one or more jobs directly as a result of Supplier and Enterprise Development initiatives by the measured entity		1

Sub-minimum requirements

The 40% subminimum needs to be achieved in each of the three subdivisions of this element. The bonus points do not contribute to this subminimum target.

Subdivision	Total Points	Required subminimum
Preferential Procurement	25	10
Supplier Development	10	4
Enterprise Development	5	2
TOTAL	40	16

Large Enterprises - Socio-Economic Development. Total points – 5
Description	Weighting points	Compliance Target
Average annual value of all Socio-Economic Development contributions as a percentage of the target	5	1% of NPAT

Qualifying Small Enterprises (turnover between R10m and R50m)

Qualifying Small Enterprises - Ownership. Total points - 25 (PRIORITY – all need to comply)
Description		Weighting points	Compliance Target
	Voting rights
Exercisable voting rights in the enterprise in the hands of black people.		5	25% + 1 Vote
Exercisable voting rights in the enterprise in the hands of black women.		2	10%
	Economic interest
Economic interest in the enterprise to which black people are entitled		5	25%
Economic interest in the enterprise to which black women are entitled		2	10%
New Entrants or Designated Groups		3	2%
Net value		8	25%

Qualifying Small Enterprises - Management Control. Total points - 15
Description		Weighting points	Compliance Target
	Executive Management
Black representation at Executive Management		5	50%
Black female representation at Executive Management		2	25%
	Senior, Middle and Junior Management
Black senior, middle and junior management		6	60%
Black female senior, middle and junior management		2	30%

Qualifying Small Enterprises - Skills Development. Total points - 25 (PRIORITY – can be omitted if other priority element is selected)
Description		Weighting points	Compliance Target
Skills development expenditure on learning programmes specified in the Learning Programmes Matrix for black employees as a percentage of leviable amount		15	3%
Skills development expenditure on learning programmes specified in the Learning Programmes Matrix for black female employees		7	1%
Skills development expenditure on learning programmes specified in the Learning Programmes Matrix for black employees with disabilities as a percentage of leviable amount		3	0.15%
	Bonus points
Number of black people absorbed by the Measured and Industry Entityat the end of the learnership programme		5	100%

Qualifying Small Enterprises - Enterprise and Supplier Development. Total points - 30 (PRIORITY – can be omitted if other priority element is selected)
Description		Weighting points	Compliance Target
	Preferential Procurement
B-BBEE procurement spend from all Empowering Suppliers based on the B-BBEE procurement recognition levels as a percentage of total measured procurement spend		15	60%
B-BBEE procurement spend from all Empowering Suppliers that are at least 51% black owned based on the applicable B-BBEE procurement recognition levels as a percentage of total measured procurement spend		5	15%
	Bonus points
B-BBEE procurement spend from Designated Group Suppliers that are at least 51% black owned		1	1%
	Supplier Development
Annual value of all supplier development contributions made by the measured entity as a percentage of the target		5	1% of NPAT
	Enterprise Development
Annual value of all Enterprise Development and Sector Specific Programmes made by the measured entity as a percentage of the target		5	1% of NPAT
	Bonus points
Bonus points for graduation of one or more Enterprise Development beneficiaries to graduate to the Supplier Development level		1
Bonus points for creating one or more jobs directly as a result of Supplier and Enterprise Development initiatives by the measured entity		1

Sub-minimum requirements

The 40% subminimum needs to be achieved in each of the three subdivisions of this element. The bonus points do not contribute to this subminimum target.

Subdivision	Total Points	Required subminimum
Preferential Procurement	20	8
Supplier Development	5	2
Enterprise Development	5	2
TOTAL	30	12

Qualifying Small Enterprises - Socio-Economic Development. Total points – 5
Description	Weighting points	Compliance Target
Average annual value of all Socio-Economic Development contributions as a percentage of the target	5	1% of NPAT

 

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Zungurisation part duh

Vodacom leaps higher on Neotel approval if you are a supplier to them you'd better blacken up quickly

Vodacom is also required to invest R10bn in fixed-line infrastructure in the next five years and ensure it meets black economic empowerment criteria.

The commission found that the proposed transaction is likely to substantially lessen or prevent competition in the mobile services market, hence the stringent conditions.

via www.techcentral.co.za

Perhaps we now can understand why Vodacom is making such ridiculous demands on their suppliers.